covering the digital media world for the 10+3 nations… China, Japan, Korea and ASEAN

One bit of mystery has been cleared up: PaidContent.org has reported that 3 private equity firms are the heretofore unnamed investors in $180 mm of Sina (NSDQ:SINA) stock, providing new cash for the web portal to fund acquisitions. Sina attempted to merge with Focus Media but was blocked by regulators.

Sequoia Capital is joining with Chinese investment groups Fountainvest Partners and CITIC Capital to back a management-led purchase of 5.6 million new shares, worth 9.4 percent of the company.

No word yet on the specific targets in mind, both from an industry and a geographic perspective, but this is a war chest (at least on the surface) most suited for smaller acquisitions and strategic investment.

We reported a little over a week ago that the early sales in China of Apple Inc.’s (NASDAQ: AAPL) iPhone were shaping up to land the much-anticipated launch on a Top 10 Product Flops lists for 2009. While the jury is still out, Apple’s Chinese mobile partner, China Unicom (Hong Kong) Ltd. ((ADR) NYSE: CHU) is fighting back with its own spin on the iPhone’s future on the mainland. According to a story on China Daily, the company is claiming that ” it expects nearly 10% of the third generation (3G) users in the country to switch to Apple Inc.’s iPhone in the next couple of years.”

There’s no doubt that the Chinese market for 3G devices — largely consisting of smartphones — is going to explode over the next few years. At a press conference back in August, the Minister of Industry and Information Technology, Li Yizhong, insisted that the top 3 mobile carriers — China Unicom, China Mobile Limited ((ADR) NYSE: CHL) and China Telecom Corporation Limited ((ADR) NYSE: CHA) — need to develop at least 50 million 3G users each within the next 3 years, pushing for an even higher, and universally discounted goal of 80 million 3G users each by the close of 2012. If the ministries goal of reaching 150 to 240 million 3G users by 2012 is reached it would make China Unicom’s 10% conversion claim a substantial achievement with a user-base of 24 million iPhones.

So what’s the truth on the iPhone’s future in China? We don’t know but we wouldn’t count it out just yet. One of the biggest concerns with the phone is its pricing which is pretty steep. The device can cost as much as RMB6,999 ($1,025), without a service contract, giving it a prohibitively expensive price point. However, the product will be free to customers that sign up for China Unicom’s high-end 2-year calling plan which runs RMB886 (US$130) per month. For those users who already have high voice and data needs, the iPhone could be a “give me.”

So maybe price isn’t the real problem for gaining market acceptance BUT that doesn’t mean the iPhone doesn’t have other significant hurdles to overcome:

NUMBER PORTABILITY: China Unicom hopes not only to convert its own users to the iPhone but also to poach competitors’ customer who want the device; however, unlike the Read the rest of this entry »

The China Internet Network Information Center (CNNIC), the state network information center of China, is a regular source of Internet survey data. It recently released an in-depth study about the rise of social networking sites (SNS) and applications, providing excellent demographic breakdowns and lists of leading destinations for Chinese netizens. The report is only available in Chinese right now but we’ve highlighted some of the most interesting demographic stats below:

DEMOGRAPHICS

Chinese social media users is projected to reach 124 million people by the end of 2009.

The gender split is relatively close with a moderate male bias of 52.9% versus 47.1% females.

The majority of SNS users (84%) are under 30 years old with over 50% in their 20s.

On November 18, NetEase.com, Inc. ((ADR) NASDAQ: NTES), one of China’s leading Internet and online game services providers, announced its unaudited financial results for the quarter ended September 30, 2009. It has certainly been a tough year for the company with its online gaming revenue seriously compromised by its regulatory difficulties in re-launching World of Warcraft (WoW), the leading MMORPG which it began licensing from Activision Blizzard Inc.’s (NASDAQ: ATVI) Blizzard Entertainment in June 2009.

Key financial highlights include:

Total revenues of RMB879.4 million (US$128.8 million) represent a .8% quarter over quarter (Q-o-Q) increase from Q2 2009 revenues of RMB872.1 million (US$127.8 million) and a 9.0% increase from the year earlier revenues of RMB806.6 million (US$118.2 million).

Online gaming revenues of RMB775.1 million (US$113.6 million) represent a -.8% Q-o-Q decrease from Q2 2009 revenues of RMB781.5 million (US$114.5 million) and a 14.8% increase from the year earlier revenues of RMB675.1 million (US$98.9 million).

Ad revenues of RMB86.0 million (US$12.6 million) for represent an18.1% Q-o-Q increase from Q2 2009 revenues of RMB72.8 million (US$10.7 million) but a whopping -23.9% decrease from the year earlier ad revenues of RMB113.0 million (US$16.6 million).

Gross profit margin for the online game business was 79.9%, compared to 88.3% in Q2 2009 and 89.7% in Q3 2008. The Q-o-Q and Y-o-Y decreases in GM were primarily attributable to the additional cost of revenues incurred for the ramp-up and operation of World of Warcraft.

Net profit for of RMB393.8 million (US$57.7 million) represents a -15.8% decrease from Q2 2009 profit of RMB468.1 million (US$68.6 million) and a 25.7% increase from the year earlier profit of RMB313.3 million (US$45.9 million).

Looking at the above financial highlights shows that Netease gaming revenues have flattened since the last quarter while operating and marketing expenses have grown. At the same time ad revenues are starting to come back but have taken a large hit since the previous year and is unlikely to make up anytime soon for the troubles the company is experiencing in the fiercely competitive gaming market.

“With regard to our advertising business, our recent consolidation of the portal business operations in Beijing and other new marketing strategies launched in the beginning of the year began to deliver promising results despite the fact that the overall economy in China remained cautiously optimistic during the third quarter. We achieved sequential quarter-over-quarter gains in terms of both the number of active advertisers and sales revenue during the third quarter of 2009 and remain cautiously optimistic about the course of our advertising business through the remainder of 2009 and into 2010.”
– William Ding, Chief CEO and Director, NetEase

Of course the 800-pound Panda in the room is the ongoing regulatory troubles that Netease is experiencing in re-launching World of Warcraft, a blockbuster game that had around 4 million loyal Chinese players when it acquired the rights away from The9 Limited ((ADR) NASDAQ: NCTY) when The9′s licensing deal expired in June. Since its acquisition, Netease has been Read the rest of this entry »

According to multiple reports, another rumor has surfaced of the iPhone hitting South Korea – this time as early as next week. No doubt due in part to Apple clearing the final regulatory hurdle in South Korea with the granting of a business license for location based services from the Korea Communications Commission, reports are that the country’s second-largest carrier, KT Corp. will begin taking orders on Thursday and begin iPhone sales on November 28th, as reported originally by the Chosun Ilbo.

The much-touted Apple iPhone will finally hit the Korean market next week. KT, the official local supplier of the iPhone, has yet to make a statement on its release schedule, but industry insiders say KT will begin taking online reservations from Thursday and distributing the famous smartphone from Nov. 28. KT aims to initially sell 150,000 units priced between W250,000 and W300,000 (US$1=W1,156.)

Korea’s well developed mobile market is dominated by local champions LG and Samsung, who sell hundreds of millions of phones around the world. More as this story develops.